This Jan. 29, 2012 photo, shows a Wendy’s restaurant in Culver City, Calif. Wendy?s Co.?s adjusted net income fell to $4.3 million in the fourth quarter, a 29 percent drop from $6.1 million a year ago. (AP Photo/Reed Saxon)
This Jan. 29, 2012 photo, shows a Wendy’s restaurant in Culver City, Calif. Wendy?s Co.?s adjusted net income fell to $4.3 million in the fourth quarter, a 29 percent drop from $6.1 million a year ago. (AP Photo/Reed Saxon)
In this Jan. 29, 2012 photo, a customer leaves a Wendy’s restaurant in Los Angeles. Wendy?s Co.?s adjusted net income fell to $4.3 million in the fourth quarter, a 29 percent drop from $6.1 million a year ago. (AP Photo/Reed Saxon)
NEW YORK (AP) ? Wendy’s new CEO on Monday called the dour results of the past few years “self-inflicted wounds” and vowed to do better, laying out plans that included hiring top-tier workers and reclaiming market share from higher-end competitors like Five Guys and Smashburger.
Emil Brolick, the CEO since September, told investors on Monday that he was intent on winning back customers, jaded by a stale menu and inconstant service, as well as investors, who have grown weary of “a little bit of overpromising and under-delivering.”
And rather than blaming the struggling economy for the revenue declines and quarterly losses of the past few years, Brolick said that the company’s problems were its own fault. Though Wendy’s had carved out a niche in the restaurant business as fast food for grownups, it had lost its way in recent years.
“These are not DNA issues,” said Brolick, who also worked at Wendy’s during more halcyon days of the late ’80s and early ’90s. “These are issues we caused, and any time you have self-inflicted wounds, you can correct self-inflicted wounds.”
Brolick said he was intent on taking back lost market share from the likes of fast-casual competitors like Panera and Chipotle, offering food that was just as good but at a lower price. The company has revamped its menu and is remodeling stores. It sold Arby’s, which had been a drag on earnings, over the summer. And it’s now intent on hiring top-tier employees, Brolick said.
Brolick, who was most recently a top executive at Yum Brands Inc., said he’s bringing all Wendy’s locations up to consistent standards for friendliness and cleanliness, rather than current, unpredictable state of “one there is really, really good but this one over here isn’t quite what it needs to be.”
“We’ve made great progress in getting rid of those F restaurants and getting more A’s and B’s, but we’re still in that territory,” Brolick said.
He also said he’d hire store managers on par with the people he sees at higher-end competitors like Chipotle and Panera. “Those folks at the bottom corner, there’s a job waiting for them at our competitors,” said Brolick, who has also hired a new general counsel at the Ohio headquarters and is adding a chief marketing officer and chief people officer.
Brolick said it was important to grab market share from higher-end competitors because he doesn’t want to “be caught in the middle.” Companies need to appeal to either low-end shoppers, such as Wal-Mart and Costco do, he said, or to high-end shoppers, such as Tiffany or Nordstrom.
Like many fast-food chains, Wendy’s is taking some of its turnaround plans from McDonald’s book. The much-larger burger chain has introduced new offerings like fancy coffee drinks and smoothies meant to appeal to higher-end customers who previously might have shunned it. It has remodeled restaurants and added wireless access for the same reasons. And it has kept prices at fast-food levels so that its reliable base of cash-strapped customers don’t flee for cheaper hamburgers at the gas stations.
It has run into some resistance from franchisees who sometimes have to foot the bill for the changes. Brolick said Wendy’s franchisees were “very, very supportive “of the plans. He acknowledged that “we are going to spend a lot of their money,” then added later: “The economics have to work. They do work.”
Brolick’s message to investors, who gathered at the Nasdaq building in New York, came a few hours after the company reported mixed results for the fourth quarter.
Wendy’s income from continuing operations fell 30 percent to $4.3 million in the last three months of the year, down from $6.1 million in the fourth quarter of 2010.
However, that number offers the company some vindication for its oft-repeated argument that Arby’s was to blame for the dour results of the past few years. The $6.1 million profit a year ago was far better than the $10.8 million loss it originally reported for that period, when it was still bundling its results with Arby’s.
Wendy’s marriage with Arby’s was short-lived. It began in the depths of the financial crisis in fall 2008 and ended last summer when Wendy’s sold Arby’s to a private-equity firm, saying it wanted to focus on the Wendy’s brand. Wendy’s said Monday it spent nearly $46 million over 2011 to break up with Arby’s, including severance costs for some employees and retention bonuses for others.
Revenue rose 5.6 percent to $615 million, narrowly beating the $613 million predicted by analysts. The chain credited more customers visiting and spending more when they did, including on the revamped Dave’s Hot ‘N Juicy cheeseburger. Higher prices also helped.
Revenue at restaurants open at least a year climbed 4.4 percent in North America, the highest number in nearly 8 years, according to the company. That’s a key measure of a company’s health because it strips out the effect of newly opened or closed stores.
On a per-share basis, adjusted earnings were 4 cents, in line with the expectations of analysts polled by FactSet. That number excluded one-time charges like the costs for selling Arby’s and writing down the value of some of its assets. With those charges, per-share earnings would have been 1 cent per share.
Last week, Barclays Capital analyst Jeffrey Bernstein spoke favorably of the changes at Wendy’s, listing the stock as a buy and saying that it was trading at a discount compared to other fast-food companies. Sanford C. Bernstein analyst Sara Senatore said Monday that revenue numbers beat her expectations. But she also said that the company’s guidance for the year ? it said it’s expecting a low single-digit increase in a key measure called adjusted earnings before interest, taxes, depreciation and amortization ? was below Wall Street’s estimates of 7 percent growth.
Wendy’s shares fell 11 cents, or 2.2 percent, to $5.09 in midday trading.
Associated Press
Source: http://hosted2.ap.org/APDEFAULT/f70471f764144b2fab526d39972d37b3/Article_2012-01-30-Earns-Wendy’s/id-819e72d1adf5495bb59cc1cb76785958
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Passengers queue up to board a train at Shanghai Railway Station, as millions of Chinese head home to celebrate the upcoming Lunar New Year, in Shanghai, China on Thursday Jan. 19, 2012. (AP Photo/Eugene Hoshiko)
Passengers queue up to board a train at Shanghai Railway Station, as millions of Chinese head home to celebrate the upcoming Lunar New Year, in Shanghai, China on Thursday Jan. 19, 2012. (AP Photo/Eugene Hoshiko)
Passengers queue up to board a train at Shanghai Railway Station, as millions of Chinese head home to celebrate the upcoming Lunar New Year, in Shanghai, China on Thursday Jan. 19, 2012. (AP Photo/Eugene Hoshiko)
A young passenger waits to board a train at Shanghai Railway Station, as millions of Chinese head home to celebrate the upcoming Lunar New Year, in Shanghai, China on Thursday Jan. 19, 2012. (AP Photo/Eugene Hoshiko)
Passengers wait to board trains at Shanghai Railway Station, as millions of Chinese make their way home to celebrate the upcoming Lunar New Year, in Shanghai, China on Thursday Jan. 19, 2012. (AP Photo/Eugene Hoshiko)
Chinese travellers wait to catch a train at the West Railway Station in Beijing, China, Thursday, Jan. 19, 2012. Millions of Chinese are expected to cram onto China’s bus and train network to return home for the Chinese Lunar New Year which falls on Jan. 23, 2012. (AP Photo/Andy Wong)
BEIJING (AP) ? Desperate to return home for China’s most important holiday, migrant worker Li Zhuqing lined up for six chilly days and nights at a train station ticket counter only to be told that all the seats were sold out.
Reports of Li’s plight in Hangzhou prodded local media to help Li and his family travel home after his case touched a nerve in China, where getting home for Lunar New Year is a nightmare for tens of millions and represents the world’s largest seasonal migration of people.
However, a new twist has been added this year with the introduction of online train ticket sales: Many of the country’s less-computer-savvy migrants like 48-year-old Li seem to have been left out in the cold.
“I was very sad and angry,” Li said. “Why couldn’t I get a ticket while every train was full of passengers?”
In the days leading up to Monday’s start of the Year of the Dragon, buses, trains and their stations will burst at the seams with people trying to return to hometowns for a holiday that’s like Thanksgiving, Christmas and New Year rolled into one.
For many people, the holiday is the one chance a year to see family, and they return home laden with gifts.
“I told myself I must reunite with my parents whom I’d left in loneliness for a year,” Li said in a phone interview after he successfully made it home to his parents’ place in Hunan province.
“They had cried over the phone when they knew I didn’t get the tickets and had fallen ill. They told me they didn’t want anything from me. They just wanted me to be home,” he said.
The importance of the holiday, combined with China’s sheer size, makes the scale of the migration massive. Transport officials estimate that Chinese will make 3.2 billion trips, from intercity flights and trains to local bus rides to villages, in the six weeks around the holiday, which is also known as the Spring Festival.
Some 900,000 large- and mid-sized buses will be dispatched to transport 80 million people a day while 14,000 flights and nearly 700 trains have been added, state media report. In the south, traffic police have dispatched cars and helicopters to escort tens of thousands of migrants riding motorcycles home.
“Spring Festival travel in China is phenomenal. Nowhere else in the world do so many people move at one time,” said John Scales, the World Bank’s transport expert in Beijing.
Just five days of rail trips during the Chinese holiday equal all the trips made on the United States’ Amtrak passenger rail system in one year, Scales said.
It’s a Herculean undertaking for an authoritarian government which stakes its legitimacy in part on organizing large-scale events and which worries that mishaps might trigger questions about its competence.
With the memory of a bullet train crash last year still fresh on the minds of many, the government has emphasized safety in its preparations for this year’s travel rush.
When thick smog, snow and rain halted trains in central China, grounded flights in the north and closed highways around the country this week, state media reported that transport officials acted quickly to reduce delays.
The biggest frustration for Chinese has been buying tickets.
For the first time, the government this year is allowing tickets to be bought online or by phone, instead of only in person or through agents. Rampant scalping, a scourge in the past, has reportedly been reduced by a new requirement that identification cards be presented whenever tickets are bought. Local railway bureaus have set up microblogs to answer questions and provide updates on ticket sales.
But the process is still an ordeal. Online services and phone hotlines have been overwhelmed by orders, meaning that many people have been forced to rely on the traditional way of waiting at ticket windows.
Even when they do work, the online services disadvantage older migrant workers with little Internet access, like Li in Hangzhou.
Early this month, Li prepared for what he thought would be a one-day wait in the cold at the Hangzhou train station, throwing on a wool sweater and heavy coat. He bought a piece of cardboard from a fruit seller to lay on the wet ground at night when the sales window closed.
For six days, he was told that tickets to his hometown of Yongzhou and nearby cities had already been sold out. But he kept waiting in case some tickets were returned ? which often happens.
In previous years, he was always able to get tickets after waiting several hours, he said.
News of Li’s woes circulated widely on China’s popular microblog sites. A few local media companies paid for Li and his family to take a train to another city and then arranged for a van to drive them the rest of the way home, he said.
In Shanghai, 61-year-old migrant Wang Yueying finally obtained a standing-room-only ticket for the 30-hour journey to the northern city of Changchun where her daughter lives after someone returned a ticket at the train station.
“In the past, I could spend 50 or 100 yuan ($15) more to buy a ticket from scalpers in the black market, but not any more,” said Wang, a teacher. “The online system is much easier for white-collar workers, they can get online more quickly and have better skills. It is too hard for the migrant workers and the elderly.”
Frustration over tickets has triggered noisy confrontations.
Photos posted online showed about 50 people in the southern city of Shenzen blocking a road last Saturday after being unable to buy tickets at a train station. Some of them appeared to be in heated arguments with police.
Rising incomes are giving some people the means to avoid the train crush altogether by a new alternative: car pooling. People who want to defray the costs of driving home can post notices on websites detailing their travel dates, destinations and contact numbers.
“Train tickets are very scarce right now and difficult to buy,” said Zhao Yongliang, a manager for a water purifier company in Beijing, as he and a couple picked up another two passengers on Wednesday to head south to their homes in Henan.
Zhao said each passenger would chip in 200 yuan to cover highway tolls and gas.
“I’m in a really good mood because I can set off this morning and be reunited with my family by this evening,” Zhao said with a big grin.
___
Associated Press researchers Yu Bing in Beijing and Fu Ting in Shanghai contributed to this report.
Associated Press
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